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B2L ownership (CGT/SDLT)
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Tom Mozy
Posted: 12 September 2024 10:09:15(UTC)
#1

Joined: 09/07/2013(UTC)
Posts: 424
Hi,

I bought my main residence in 2014 and then married and bought a home with my wife in 2019. We rent out the house bought in 2014. My wife contributed half of all bills and mortgage payments when we lived in the first house but she was never on the mortgage as she had poor credit when we first met. (all sorted now)

Looking to transfer 50% of my B2L property to my wife as the rent is pushing me into higher rate tax brackets and she's has considerable basic rate margin left.

I understand gifts between spouses wont attract CGT (unless that changes in autumn)

With regard to Stamp duty as the property is mortgaged we will need to pay stamp but cant get clarity what the charge will be.

£142500 current value, mortgage outstanding of £51250. I believe the consideration for SDLT is £51250 of which half is taxable.

3% of £25625 = £768.75

Are my assumptions correct? Next stop a solicitor....
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Raj K
Posted: 12 September 2024 10:21:51(UTC)
#2

Joined: 22/04/2016(UTC)
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I think you are correct as I had to do something similar in 2019 when my brother transferred ( gift , no cash payment by me) his half share of a property to me ( after which I owned 100%). He had to pay CGT on the disposal and my stamp duty liability was based on me taking on the remaining half of the mortgage ( the consideration)

You are gifting half to your wife and she is taking on half of the mortgage ( I assume her name will be on the mortgage after the transfer) so the consideration will be the amount you stated and SDLT will be 3% as it’s in the threshold below £250000 which is 0% plus 3% for additional home owners.

I know HMRC have some useful examples of transfer of equity on their website somewhere.
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Newbie on 12/09/2024(UTC)
Tom Mozy
Posted: 12 September 2024 10:44:09(UTC)
#3

Joined: 09/07/2013(UTC)
Posts: 424
Thankyou Raj K

Going to contact the mortgage provider so see if my current mortgage will allow me to add my wife.

Will then see if I can sort the paperwork. Might need a solicitor to ensure its done correctly.
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Raj K on 12/09/2024(UTC)
Newbie
Posted: 12 September 2024 10:59:05(UTC)
#4

Joined: 31/01/2012(UTC)
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I did something similar back in 2020

Like yourself our house was in my name alone and had a £350k mortgage on it.
If I was to transfer to her then we would have needed to get approval from the mortgage (maybe even re-apply for a new one) and also pay stamp duty.
Upon advice, we decided to clear the mortgage in full.
Then I gifted her 50% of the property using TR1 form with Nil Consideration.
That way not stamp duty.
We then remortgaged for £800k (cheap access to monies)
I would suggest that you also talk to a tax specialist as well as solicitor as it was our tax advisers who suggested this whereas the solicitor was more focused on the TR1 form and gift deeds etc (the latter it turned out was not needed as per se as information and certain aspects relating to bankruptcy were input into the TR1)
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Raj K on 12/09/2024(UTC)
Raj K
Posted: 12 September 2024 11:04:20(UTC)
#5

Joined: 22/04/2016(UTC)
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Newbie;318807 wrote:
I did something similar back in 2020

Like yourself our house was in my name alone and had a £350k mortgage on it.
If I was to transfer to her then we would have needed to get approval from the mortgage (maybe even re-apply for a new one) and also pay stamp duty.
Upon advice, we decided to clear the mortgage in full.
Then I gifted her 50% of the property using TR1 form with Nil Consideration.
That way not stamp duty.
We then remortgaged for £800k (cheap access to monies)
I would suggest that you also talk to a tax specialist as well as solicitor as it was our tax advisers who suggested this whereas the solicitor was more focused on the TR1 form and gift deeds etc (the latter it turned out was not needed as per se as information and certain aspects relating to bankruptcy were input into the TR1)



That’s interesting, I also though about that strategy but was advised ( think it was the solicitor, maybe I should have gone to the tax specialist ) that there would have to be a time lapse ( like a year maybe) between clearing the mortgage and then doing a transfer as it could be deemed a tax avoidance strategy. Did you do the transfer straight after clearing the mortgage or was there a time lag between ?



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Newbie on 12/09/2024(UTC)
jonathan rowe
Posted: 12 September 2024 11:51:02(UTC)
#10

Joined: 30/03/2018(UTC)
Posts: 176
Have you considered a ltd company?

You can offset full interest as an expense and tweak ownership via issuing new shares

Downside is stamp on full amount, need to prep accounts/returns plus higher BTL mortgage rate ... although they seem to be getting better
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Newbie
Posted: 12 September 2024 11:54:16(UTC)
#6

Joined: 31/01/2012(UTC)
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Raj K;318811 wrote:
Newbie;318807 wrote:
I did something similar back in 2020

Like yourself our house was in my name alone and had a £350k mortgage on it.
If I was to transfer to her then we would have needed to get approval from the mortgage (maybe even re-apply for a new one) and also pay stamp duty.
Upon advice, we decided to clear the mortgage in full.
Then I gifted her 50% of the property using TR1 form with Nil Consideration.
That way not stamp duty.
We then remortgaged for £800k (cheap access to monies)
I would suggest that you also talk to a tax specialist as well as solicitor as it was our tax advisers who suggested this whereas the solicitor was more focused on the TR1 form and gift deeds etc (the latter it turned out was not needed as per se as information and certain aspects relating to bankruptcy were input into the TR1)


That’s interesting, I also though about that strategy but was advised ( think it was the solicitor, maybe I should have gone to the tax specialist ) that there would have to be a time lapse ( like a year maybe) between clearing the mortgage and then doing a transfer as it could be deemed a tax avoidance strategy. Did you do the transfer straight after clearing the mortgage or was there a time lag between ?

I think we waited 6-9. months after paying off the mortgage (it was the scare from Covid and people passing away that spooked me/us and felt need to put in joint names) and then another 6-12 months before re-mortgaging.

The re-mortgaging was not planned at all - my banker called me to say that I was eligible should I want or need it, so we just took the monies - bought a couple of BTL's and invested the rest.

I believe the question of avoidance was briefly mentioned but there was enough evidence to suggest otherwise form my end (maturing options, had been overpaying already, rate was coming to an end etc etc) to effectively bat away any doubts. More attention seemed to be focused around bankruptcy issues - present or future.
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Raj K on 12/09/2024(UTC)
ANDREW FOSTER
Posted: 12 September 2024 12:00:31(UTC)
#7

Joined: 23/07/2019(UTC)
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Newbie;318807 wrote:
I did something similar back in 2020

Like yourself our house was in my name alone and had a £350k mortgage on it.
If I was to transfer to her then we would have needed to get approval from the mortgage (maybe even re-apply for a new one) and also pay stamp duty.
Upon advice, we decided to clear the mortgage in full.
Then I gifted her 50% of the property using TR1 form with Nil Consideration.
That way not stamp duty.
We then remortgaged for £800k (cheap access to monies)
I would suggest that you also talk to a tax specialist as well as solicitor as it was our tax advisers who suggested this whereas the solicitor was more focused on the TR1 form and gift deeds etc (the latter it turned out was not needed as per se as information and certain aspects relating to bankruptcy were input into the TR1)


I might be wrong on this, but I believe that if you gift at nil value then if/when it comes to sell the property that Captial Gain Tax will be levied on the whole 50%...?

I was advised this when looking at a sheltering a property from care home costs.
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2 users thanked ANDREW FOSTER for this post.
Newbie on 12/09/2024(UTC), Raj K on 12/09/2024(UTC)
Newbie
Posted: 12 September 2024 12:09:10(UTC)
#8

Joined: 31/01/2012(UTC)
Posts: 3,818

Thanks: 6012 times
Was thanked: 7026 time(s) in 2603 post(s)
ANDREW FOSTER;318828 wrote:
Newbie;318807 wrote:
I did something similar back in 2020

Like yourself our house was in my name alone and had a £350k mortgage on it.
If I was to transfer to her then we would have needed to get approval from the mortgage (maybe even re-apply for a new one) and also pay stamp duty.
Upon advice, we decided to clear the mortgage in full.
Then I gifted her 50% of the property using TR1 form with Nil Consideration.
That way not stamp duty.
We then remortgaged for £800k (cheap access to monies)
I would suggest that you also talk to a tax specialist as well as solicitor as it was our tax advisers who suggested this whereas the solicitor was more focused on the TR1 form and gift deeds etc (the latter it turned out was not needed as per se as information and certain aspects relating to bankruptcy were input into the TR1)


I might be wrong on this, but I believe that if you gift at nil value then if/when it comes to sell the property that Captial Gain Tax will be levied on the whole 50%...?

I was advised this when looking at a sheltering a property from care home costs.

Generally yes I believe unless
- It was your main residence (for both spouses)
- The gift was to a spouse I think.
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Rookie Investor
Posted: 12 September 2024 12:42:42(UTC)
#12

Joined: 09/12/2020(UTC)
Posts: 2,087

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I did a transfer of equity from my sibling to me (50% share transferred to me). There was also a mortgage on it. Apart from the solicitor fees and some minor lender admin fee, there was no other costs, certainly no SDLT or CGT. It happened 6 months after we bought the property. Value close to £600k. This was back in 2016.
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Raj K on 12/09/2024(UTC)
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